Square Valuation Could Hit $4 Billion, But Silicon Valley May Be Wary After Facebook

By Sarah McBride

SAN FRANCISCO (Reuters) - As Silicon Valley scrambles to assess the impact of the Facebook IPO mess, all eyes are on Square.

The much-heralded, next-generation payments company had been aiming to raise its next round of venture capital funds at a valuation of as much as $4 billion - up from $1 billion just a year ago. That is the sort of acceleration in valuation that happened with Facebook prior to its public market debut.

But with Facebook worth $26 billion less than it was just two weeks ago, industry insiders say that concerns about overexuberance around social media and other Internet companies -- which began to emerge late last year -- have mounted.

"There's a chill settling in over the market," said one late-stage venture capitalist. "Going back to reality is helpful," he added.

The ability of Square, and a handful of other hot Internet start-ups, including Asana, Just Fabulous and Ideeli, to raise money at super-premium valuations is now shaping up as a test of whether Facebook's IPO marks a turning point in the latest tech boom.

Facebook's IPO was a success by one key metric - raising the maximum possible amount of cash in public markets for the company and early investors - but it was a massive failure for later-stage investors and people who bought Facebook shares at the IPO price of $38. The shares traded at $28 on Thursday afternoon.

A number of high-profile start-ups had the luck or foresight to raise money from venture capitalists just ahead of the Facebook IPO. Question-and-answer service Quora, founded by Facebook alumni, raised $50 million recently at a reported $400 million valuation, even though it has no revenue. Online bulletin board Pinterest raised $100 million at a $1.5 billion valuation...READ THE REST OF THE ARTICLE HERE VIA HUFFINGTONPOST.COM